COM71001 - Enquiries: CTSA enquiries: introduction
HM Revenue & Customs right of enquiry
Notice of intention to enquire
Scope of enquiry
Selection
Random selection of cases for compulsory full enquiry
Full and aspect
Interaction between CQI or Caseflow and COTAX
Enquiry notice: form and issue
Company amendments (Taxpayer Amendments) during enquiry
Revenue amendments (Jeopardy Amendments) during enquiry
Concluding enquiries
HM Revenue & Customs right of enquiry
CTSA is a ‘process now - check later’ regime. The company’s self assessment (Word 28KB) stands, and the liability is collectible, without any action on our part. But we have the right to correct obvious errors or omissions in the return. See subject ‘Correcting a Return’ (COM23050) in the ‘Assessing’ business area. Once we have processed the return, Part IV Sch 18 FA 1998 gives us the explicit right to enquire into the return. See the Enquiry Manual, at EM8000 onwards, for guidance on enquiries into company tax returns for a CTSA AP.
HM Revenue & Customs is under no obligation to give notice that a particular return has been ‘accepted’ and that no enquiries will be made. It will not do so, even if requested, other than in specific circumstances relating to the completion of a winding-up. We will provide a clearance in these cases, if appropriate, that we will not take the return up for enquiry. (See the Enquiry Manual at EM8260.)
The right of enquiry extends to anything contained in the return, or which is required to be contained in the return. This includes claims and elections, and amounts which may affect the company’s liability for other APs or the liability of another company by way of group relief and ACT surrender. (Para 25 Sch 18 FA 1998.) It also extends to any amendment to the return.
Notice of intention to enquire
You must give the company written notice of intention to enquire (the ’notice of enquiry’) within a statutory time limit (often called the enquiry window).
The notice must be issued on or before the last date for enquiry. See subjects ‘Time limit for opening an enquiry’ (COM71005) and ‘Opening an enquiry’ (COM71010).
Scope of enquiry
If the enquiry results from an amendment to the return, the scope of the enquiry is limited to matters relating to or affected by that amendment unless we are still within the time limit to enquire into the original return. (Para 25(2) Sch 18 FA 1998.) (See the Enquiry Manual at EM1520 - EM1521.)
Otherwise, an enquiry into a return can extend to anything in the return, or anything required to be contained in the return. (Para 25(1) Sch 18 FA 1998.)
Importantly, you do not have to (and should not) give reasons for dissatisfaction with the return.
However, HM Revenue & Customs is only entitled to one bite of the cherry. You cannot open an enquiry if you have already opened and closed an enquiry into that return and have received no new amendment. You may still be able to make a Discovery Assessment (Word 28KB) or determination for that period. (Para 24(5) and Para 41 Sch 18 FA 1998.)
There is a similar right to enquire into any claim notincluded in a return, that is, made outside a return. (Para 5 Schedule 1A TMA 1970.) But if we have issued a notice to deliver a return and a claim can be made as part of the return, that is the only way in which it can be made.
Companies are taxed, and generally have to make returns, for APs. It sometimes happens that a company mistakes its true AP when completing its return. Where a company’s return is for the wrong period, the enquiry can extend to the period for which the return should have been made. (Paras 26 & 35 Sch 18 FA 1998.) See subject ‘Enquiry Into Return For The Wrong Period’ (COM71060).
Selection
Enquiry cases are selected in accordance with national guidance.
You can use Function MAPS (Maintain AP Signals) to set a Potential Enquiry Signal on an AP you identify for potential enquiry in line with your office policy. You can also use Function NOTE (Case Notes) to record your reason for setting the signal.
Random selection of cases for compulsory full enquiry
COTAX randomly selects cases for compulsory full enquiry and sets the Random Enquiry signal on the selected AP when it issues the notice to deliver (Word 29KB) a return. You can view this signal using Function DAPD (Display AP Details).
Details of the selected cases are passed to BDCT. When the returns are recorded on COTAX the data is also passed to BDCT (see the Company Tax Mart Guide for further information).
Full and aspect
Enquiries are classified as either ‘Full’ or ‘Aspect’. But the legal context for all enquiries is the same. There is no legal distinction between Full and Aspect enquiries. See the Enquiry Manual at EM1050.
Interaction between CQI or Caseflow and COTAX
In those offices using CQI (Word 31KB)or Caseflow to control enquiry cases, the following are automatically entered and amended on COTAX by CQI or Caseflow overnight
- Enquiry in Progress signal
- Started date
And
- Enquiry Type
CQI and Caseflow do not automatically update COTAX with enquiry closure details. For more information see subjects ‘Closing an Enquiry: Non-Contract Settlements’ (COM71090) and ‘Closing an Enquiry: Contract Settlements’ (COM71120).
If your office does not use CQI or Caseflow you must use Function MAPS (Maintain AP Signals) to enter or amend the entries listed above.
Enquiry notice: form and issue
When you give notice of intention to enquire into a return you must use the wording given in the Enquiry Manual.
COTAX does not issue the notice of enquiry. You will do that locally by letter on the lines set out in EM1551-1552 and 1554. When the enquiry begins, if your office does not use CQI or Caseflow, you will use Function MAPS (Maintain AP Signals) to set the Enquiry In Progress signal (Word 37KB) on the COTAX case record. You will also tell COTAX the date the enquiry commenced and whether it is a Full or Aspect enquiry, for management information purposes.
Company amendments (Taxpayer Amendments) during enquiry
If a company amends its return while an enquiry is in progress, the amendment does not restrict the scope of the enquiry, but may be taken into account, together with any matters arising in the enquiry. (Para 31(1) and (2) Sch 18 FA 1998.)
Any change to the tax charge, and any group relief or capital allowance consequences of the amendment, only become effective once the enquiry is closed. See subject ‘Taxpayer Amendments’ (COM71020).
Revenue amendments (Jeopardy Amendments) during enquiry
During the course of an enquiry, you can make a Jeopardy Amendment (Word 29KB) to amend the company’s self assessment if you believe that
- The self assessment understates the company’s true tax liability, and
- There is likely to be a loss of tax to the Crown unless the assessment is amended at once. (Para 30 Sch 18 FA 98)
The self assessment is amended, for all purposes, when you give written notice to that effect to the company.
The company can appeal against such an amendment, and seek postponement of tax, but the appeal cannot be heard until the enquiry has ended. See subjects ‘Making Jeopardy Amendments’ (COM71040) and ‘Appeals Against Jeopardy Amendments’ (COM71050).
Concluding enquiries
An enquiry is treated as finished when you
- Give written notice of completion to the company
And
- State your conclusions (Para 32 Sch 18 FA 98)
The Closure Notice takes effect when it is issued and amends the return to give effect to the conclusions stated in the notice. (Para 34 Sch 18 FA 98, as amended by Section 119 Finance Act 2008.)
If you conclude the enquiry by contract settlement, rather than by the formal COTAX route, you should follow the general procedures in the Enquiry Manual (at EM3831 and EM6000 onwards) and the SAFE accounting procedures at EM6043 - EM6408, subject to certain modifications for any CTSA AP. See subject ‘Closing An Enquiry: Contract Settlements’ (COM71120).
